Budget 2017: Cash dealings above Rs 3 lakh banned from April 1

New Delhi: Continuing with government steps to clamp down on black money, Finance Minister Arun Jaitley today proposed to ban all cash transactions above Rs 3 lakh beginning April 1, 2017.

The decision to ban cash transactions beyond a threshold is based on the recommendation of the Special Investigation Team on black money that was set up by the Supreme Court, Jaitley said while presenting Union Budget 2017-18 in Parliament.

All cash transactions above Rs 3 lakh will be banned, he said. The SIT, headed by Justice M B Shah (retired), in July had submitted its fifth report to the Supreme Court on steps needed to curb black money.

Noting that a large amount of unaccounted wealth is stored in cash, SIT had said: "Having considered the provisions which exist in this regard in various countries and also having considered various reports and observations of courts regarding cash transactions, the SIT felt that there is a need to put an upper limit to cash transactions."

It recommended a total ban on cash transactions of Rs 3 lakh and above and that "an Act be framed to declare such transactions as illegal and punishable under law".  

Budget announcement of no cash transaction over Rs 3 lakh necessary to check black money: SIT Chairman Justice (retd) M B Shah

The SIT on black money today hailed Finance Minister Arun Jaitley's budget announcement to limit cash transactions at Rs 3 lakh but said its other recommendation to cap cash holding of an individual at Rs 15 lakh would have been a "far better" measure to check corruption.

The Chairman of the Special Investigation Team (SIT) on black money, Justice (retd) M B Shah said in order to check stash funds some "stern steps" are needed to be taken but the government also has to go by the advice of economists and others and not alone them.

"It (ban of cash transactions over Rs 3 lakh) was necessary...it is a good decision. Such a thing is prevalent in a number of countries and we have said that in our report submitted earlier. We had suggested this an year back and after a long time it has been accepted...it is good.

"But, our further suggestion to not permitting the person to hold more than Rs 15 lakh in hand or in their house is something that has not been accepted. If it would have been accepted, it would have been far better (step to combat black money)," Justice Shah told PTI.

He added the cap on cash holding "would have controlled corruption at least, as corruption is in lakhs or crores of rupees." When asked if the he was "not happy" as the SIT's cash holding recommendation has not found favour with the government, the Chairman of the high-powered panel said there are many concerns that the government has to keep in mind.

Strict steps, however, are required to check the menace of illicit or unaccounted monies, he said. "It is not a question of being not happy because suggestions are made by us and some may be accepted and some may not be accepted. It is their (government's) call. They are also advised by economists and also they are concerned with the politics of it...there is no question of my happiness...if you want to control black money then you will have have to take some stern steps.

There is no alternative," he said. Justice Shah added that the panel has been continuously suggesting anti-black money measures to the government and it will keep doing that.

When asked about demonetisation and its effects on curbing black money, the SIT chief called it a "good thing.""It is a very good thing as once (the currency is) demonetised the persons will not be able to hold unaccounted cash and that has its own effect. But some people do mischief in (illegally) converting it...it has come to the notice of the government as the Finance Minister said in his Budget speech," he said.

The SIT had made these two specific recommendations, of no cash transaction beyond Rs 3 lakh and no individual cash holding over 15 lakh, in its fifth report submitted to the Supreme Court in July last year.

The panel had felt that large amount of unaccounted wealth is stored and used in form of cash. "Having considered the provisions which exist in this regard in various countries and also having considered various reports and observations of courts regarding cash transactions the SIT felt that there is a need to put an upper limit to cash transactions," it had said.

SIT had recommended a total ban on cash transactions above Rs 3 lakh, saying "an Act be framed to declare such transactions as illegal and punishable under law." It had also said: Given the fact of unaccounted wealth being held in cash is further confirmed by huge cash recoveries in numerous enforcement actions by law enforcement agencies from time to time, the cash transaction limit can only succeed if there is a limitation on cash holding.

The SIT was notified by the central government in May 2014 on the directions of the Supreme Court. Headed by Justice Shah, Justice (retd) Arijit Pasayat is its Vice Chairman with eleven probe and regulatory agencies work under it.